UPDATE 2-Alberta warns of tough budget, sees no tax hike

* Alberta warns of tough provincial budget

* Blames low Canadian oil prices

* Not planning to increase taxes

By Jeffrey Jones

CALGARY, Alberta, Jan 21 Alberta is more than
C$3 billion ($3 billion) short of its target for sales of oil
from the oil sands due to deep discounts on the crude, but the
shortfall is not pushing the Western Canadian province to raise
taxes, tts finance minister said on Monday.

The Progressive Conservative government of Premier Alison
Redford is doing what it can to pry open new markets for the
heavy oil it depends on for up to three quarters of its
nonrenewable resource revenue. However, it does net expect
short-term results, Finance Minister Doug Horner said.

That means a March 7 provincial budget "is not going to be a
fun budget," and instead will include a series of tough measures
to deal with the much lower-than-expected take from the energy
sector, Horner told a business audience in Calgary.

Asked by a reporter if a rough estimate of a C$3 billion
shortfall in bitumen revenues for the current fiscal year was
close to accurate, Horner said: "I think you need to take out a
new napkin because it's a little higher than that."

He did not specify how much higher, saying that numbers are
still coming in. The government, which derives almost a third of
its revenues from energy, will issue a third-quarter update in
February that will include a better picture, he said.

In its second-quarter report, the government warned that its
deficit for the current fiscal year, ending March 31, could be
triple the C$886 million it forecast initially.

"It's not pretty. This differential has widened during
period of time where seasonality would normally indicate that we
would get a better result. We did not, and that's going to be
reflected in our third quarter" Horner said.

He acknowledged the challenge would be to maintain services
in such as areas as health care and education as revenues
sputter. But he ruled out an increase in taxes.

With its bounty of oil riches - the third-largest reserves
in the world - and U.S. benchmark crude above $95 a barrel,
Alberta should be raking in money. But extremely tight capacity
on pipelines to its main market, the United States, has led to
discounts of more than $40 a barrel.

That means Western Canada Select, a widely quoted grade,
sells for less than half the price of a barrel of international
benchmark Brent. With no major increases in pipeline capacity
expected in the coming few months, differentials of that
magnitude are expected to persist.

Another issue is booming U.S. oil production, which is
creating increasing competition for Canadian crude.

NATIONWIDE PROBLEM

The slump is not just hitting the Alberta economy, but is
being felt across the country, Horner said. Many jobs in
manufacturing in Ontario, fabrication in Atlantic Canada and
professional services in other provinces are dependent on a
robust energy sector, he said.

Horner said the government of Alberta sees the problem as a
structural one that requires a series of responses aimed at
opening up new markets for the supplies. This includes promotion
of a national energy strategy, supporting efforts to get oil to
Asian markets and processing crude within the province of 3.8
million people.

Alberta has been a big supporter of such contentious
projects as TransCanada Corp's Keystone XL pipeline to
Texas and Enbridge Inc's Northern Gateway line to the
Pacific Coast, though neither has regulatory approval yet.

Besides proposals to move crude to the British Columbia
Coast to gain exposure to higher Asian oil prices, the
government is examining such plans as reversing one pipeline and
repurposing another to get the crude to Quebec and points East
as well as a railway to Alaska.

"We're not saying no to anything right now," Horner said.

Despite the oil price woes, the government is not yet ruling
out its previous target to balance the budget in the upcoming
fiscal year.

"Is it going to be really, really tough to do? Absolutely,
and the longer this situation persists the harder that's going
to be."

WASHINGTON, Dec 9 Aetna Inc's chief
executive denied on Friday that its withdrawal from some
Obamacare exchanges was in retaliation for government efforts to
halt its merger with Humana Inc, as he sought to
convince a federal judge to approve the deal.

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